Correlation Between American Airlines and Take Two
Can any of the company-specific risk be diversified away by investing in both American Airlines and Take Two at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Airlines and Take Two into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Airlines Group and Take Two Interactive Software, you can compare the effects of market volatilities on American Airlines and Take Two and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Airlines with a short position of Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Airlines and Take Two.
Diversification Opportunities for American Airlines and Take Two
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Take is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Airlines Group and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive and American Airlines is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Airlines Group are associated (or correlated) with Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of American Airlines i.e., American Airlines and Take Two go up and down completely randomly.
Pair Corralation between American Airlines and Take Two
Assuming the 90 days trading horizon American Airlines Group is expected to generate 1.46 times more return on investment than Take Two. However, American Airlines is 1.46 times more volatile than Take Two Interactive Software. It trades about 0.35 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.42 per unit of risk. If you would invest 6,136 in American Airlines Group on August 30, 2024 and sell it today you would earn a total of 2,402 from holding American Airlines Group or generate 39.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Airlines Group vs. Take Two Interactive Software
Performance |
| Timeline |
| American Airlines |
| Take Two Interactive |
American Airlines and Take Two Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Airlines and Take Two
The main advantage of trading using opposite American Airlines and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Airlines position performs unexpectedly, Take Two can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Take Two will offset losses from the drop in Take Two's long position.The idea behind American Airlines Group and Take Two Interactive Software pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Take Two vs. Iron Mountain Incorporated | Take Two vs. Brpr Corporate Offices | Take Two vs. British American Tobacco | Take Two vs. Paycom Software |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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